Updated at: 1612 PST, Thursday, October 08, 2009
Pakistan stock index faces 10% ‘breather,’ Credit Suisse says

LONDON: Pakistan’s benchmark stock index may decline as much as 10 percent as it takes a “breather” after outperforming the rest of Asia in the third quarter, Credit Suisse Group AG said.

The Karachi Stock Exchange (KSE)-100 Index rose 2 percent to 9,836.50 yesterday, extending a 68 percent annual gain. The advance was driven in part by 15 straight weeks of net inflows that brought $240 million of capital from foreign investors into the market, analyst Farid Khan said in a report today.

The Karachi index has already surpassed Credit Suisse’s year-end forecast of 9,000 and investors appear to be “discounting” most of the good news in the near term, Khan said. The gauge is valued at 13 times reported earnings, more than double the level in January.

“We see an 8 to 10 percent correction as overdue now and expect the market to consolidate around the 9,200 level before treading ahead,” Khan wrote. “The valuation gap vis-a-vis history and the region has now narrowed and the call on improving macro fundamentals has largely been played. Stock picking will be more important from now on.”

MCB Bank Ltd. and National Bank of Pakistan are among lenders that are “ripe for profit-taking,” Khan said. Credit Suisse today downgraded National Bank, the country’s biggest by assets, to “underperform” from “neutral,” citing the stock’s gains over the past month.